Pixar Under SEC Investigation
Daily Variety and the Financial Times of London (paid subscription required) are reporting that two months after Apple failed to find stock options irregularities at Pixar, the Securities & Exchange Commission is double-checking their work.
According to the Financial Times, the SEC is believed to be investigating whether the animation company backdated options issued to a number of Pixar executives, including John Lasseter and Ed Catmull, during the years 1997 – 2003, a period before the company was bought by Disney.
Backdated options essentially allow an employee to receive options for a date known to be a stock-price low, allowing the employee to benefit from the stock’s rise. They are not always illegal, but failure to disclose them to the board or to investors can, in some cases, be considered a criminal activity.
Catmull received 1 million options, while Lasseter received 2 million, on Dec. 6, 2000, at the price of $13.25, according to SEC filings. Both prices were the low for the period.
Lasseter also received options in 1997, shortly before the company signed a movie distribution deal with Disney that sent the stock skyrocketing.
If Catmull and Lasseter’s options were backdated, they could have automatically pocketed, on paper, as much as $12 million in Lasseter’s case and $6 million in Catmull’s.
Though Pixar was not yet owned by Disney at the time in question, Disney stated last month that its board was carrying out an independent review after receiving inquiries from the SEC and the U.S. Department of Justice, according to the Financial Times. Disney also played down any likely financial impact from the issue.
It should be emphasized that an SEC investigation doesn’t necessarily indicate any wrongdoing. In fact, Pixar is in good company: The options controversy has swept up nearly 200 companies, including Steve Jobs’ other company, Apple Computer.
Thursday, Apple restated earnings by more than million over the last three years because of backdated options issued to Jobs, with an additional $64 million charge for nearly 6,500 questionably timed options.
In October, an internal Apple investigation found irregularities in fifteen instances of options but said that CEO Steve Jobs did not receive any, nor did he know their implications.
Apple pointedly said there’s no evidence “that any current member of management was aware of this irregularity,” suggesting it believed two former executives — possibly former chief financial officer Fred Anderson and former legal counsel Nancy Heinen, as some accounts have suggested — were granting the options.
The October findings made no mention of any questionable activity at Pixar.